FedEx, Pilots Near Deal With 40% Pay Raise After Five Years of Talks

Mere hours after FedEx’s soon-to-be spun off trucking division concluded its first investor day meeting Wednesday, the logistics giant and its pilots’ union took a step closer to resolving a five-year contract dispute.

FedEx and the Air Line Pilots Association (ALPA) have reached a tentative collective bargaining agreement for more than 5,000 FedEx pilots.

The terms of the deal will next be presented to ALPA’s master executive council for their review. If the leadership body approves the contract, it will then be subject to a ratification vote by the FedEx pilots. A date has not been disclosed.

The new contract includes hourly pay increases of nearly 40 percent this year followed by 3 percent annual raises from 2028 through 2030, according to the ALPA union. The annual jump in 2026 matches what ALPA-represented United Airlines pilots received in 2023 when they reupped their contract.

Captains will also receive as much as $150,000 in retroactive pay to cover raises missed during the negotiation period, while first officers will get up to $102,500.

“This tentative agreement reflects our commitment to our valued crew members and to our growth strategy for the airline and the business as a whole,” said Richard Smith, chief operating officer of FedEx’s international division and CEO of its airline business. “It’s a win-win for our pilots, for FedEx, and for our customers around the world.”

The on-and-off negotiations had been in limbo for years, with talks first beginning in May 2021 in an attempt to modernize what ALPA called an “outdated” contract first signed in 2015.

It took two initial years of negotiation for the parties to reach a tentative agreement in June 2023. But that deal, which was set to increase pay by up to 30 percent over five years, was shot down in the ratification process that summer.

Last June, about 300 FedEx pilots picketed outside the company’s executive offices in Memphis, Tenn. The picketing enabled the workers to air grievances over the failure to materialize a new contract, all while the delivery firm was adjusting its nationwide air network.

In recent months, pilot resignations have reached “historic levels,” raising the union’s concerns about long-term staffing, according to an ALPA press release in March.

The union indicated a “growing disconnect” between employees and the company, on claims that the pilots endured significant schedule adjustments during the peak holiday season that placed greater demands on frontline crews.

Freight unit leans on efficiency gains, higher-yield mix ahead of spinoff

As FedEx and its union get closer to the ratification process, the company is setting the table for the looming spinoff of FedEx Freight on June 1.

At the investor day, the less-than-truckload (LTL) unit said it expects compound annual revenue growth of 4 percent to 6 percent in the medium term, with 2026 revenue projections set to reach $8.7 billion on an adjusted operating income of $1.1 billion.

FedEx Freight, which competes directly with trucking companies XPO, Old Dominion and Saia, is anticipating to report an adjusted operating margin of 12 percent this year.

To bolster margins for the segment, FedEx had optimized its line haul network by leveraging advanced modeling capabilities to improve the flow of volume, while reducing the LTL’s cost to serve.

Over the past five years, the company has removed 187 million unnecessary line haul miles—or 5 percent of the miles in its network—with the help of volume forecasting, network flow simulation and mode optimization tools.

FedEx Freight also has shifted from weight-based line haul shipment planning to cube-based dimensional planning, making the process of loading and unloading goods at service center docks more efficient. With the help of DIM-in-motion technology designed to get an accurate measurement of the inside of a trailer, FedEx says it has seen a 12 percent increase in cube utilization in its network operation over the past year.

Additionally, the LTL is reducing the number of touch points in its network for each shipment, with machine learning tools helping it reduce planned handles 10 percent.

Along with the cost-cutting efficiencies, FedEx Freight plans to leverage higher-yield freight to power its goal to increase adjusted operating margin to 15 percent in the medium term. Like its parent company, the trucking unit is aiming to expand further into higher-value verticals including SMBs, healthcare, data centers and grocery.  

The impending independent company has roughly 355 shipping terminals and about 10 line haul relay sites across the U.S., Mexico and Canada, comprising 26,000 doors. Additionally, the firm owns 30,000 motorized vehicles, including more than 17,000 tractors.